If loans are forgiven, the money will be "moved" (so to speak) to the bank accounts of the indebted, not academia.
In the case of state schools, student loans also benefitted the tax payers. Student loans means such schools can charge a higher tuition, which means they need fewer subsidies from the the state.
Moreover, I wish it went to the professors etc. but with intermediaries like Great Lakes I also fear that even that is not the case.
Federally-backed student loans, undischargeable and given to all and sundry, to be spent wherever on whatever, is a gigantic short in the moral-hazard circuit.
I would throw an actual party for any dictator in the US who would do to the colleges what Henry VIII did to the monasteries.
I'm not sure you're using the term "moral hazard" correctly. If the loans were dischargeable that would be a moral hazard, because the smart thing to do would be to borrow up to your eyeballs and then declare bankruptcy ten years later on graduation day.
And the schools should not be in the business of telling students what they can afford. For one thing, they probably can't know.
Without the government guarantees, banks would think hard about whether a loan was repayable, and schools wouldn't have nearly as many anthropology or art history programs cranking out unemployable specialists year after year.
The government guarantee removes economic consequences for certain actors -- for the school and the bank, but NOT for the student. The student with an art history degree is now stuck with a massive loan that is not even dischargeable in bankruptcy, whereas the bank and the school suffer no consequences for having trained someone in an unemployable specialty of little to no economic value.
On the contrary, they are incentivized to do that.
The principal on those loans already went there, and forgiving the debt won't move any additional money there except insofar as people with unpaid student loan debt overlaps with people working in academia.
The point of a move this move is twofold. The first is to unburden people who were, in essence forced into massive debt at gunpoint as the result of fairly recent and arguably corrupt policy changes (note the lifetime health / income / well-being stats. for those without college degrees, and the role played by banking lobbies if you doubt any of this).
The second is to signal to the predatory class of administrators who have benefited the most that the party is over. It may be unfeasible to claw back what they got from massively inflating the cost of higher education, but it's more than feasible to cap the damages and force a reckoning that will almost certainly lead to vastly more efficient administrations and more economically healthy graduates.
Sure, I could see being in favour of loan forgiveness if at the same time we completely eliminated federally-subsidised loans. But I don't see that happening: I see us forgiving outstanding loans, then granting even more loans, with absolutely no pressure for students to economise.
True fact: one doesn't need a single-occupancy bedroom or a multi-room suite in order to get a good education. One doesn't need a winning football team. One doesn't need a fancy cafe with subsidised prices; one doesn't need a climbing wall. All one needs for a good education is food, shelter and good professors.
But as long as someone else is (or appears to be) footing the bill, students will angle for the nicest possible way to spend their four, or six, or more, years.
The academic dream is that everyone deserves the same education. This is obviously not a reality, but you should at least acknowledge the middle ground is disliked by the "academic class" and the "non-academic class" alike: it's expensive as hell and we still have idiots running the world.
Not just that: this is, ultimately, a giveaway to the academic classes, who have lucked into the business of selling things to unwise consumers spending someone else's money.
When these loans are forgiven (let's not fool ourselves: they will be), the federal government will have moved $1.3 trillion into the coffers of colleges, universities, professors, junior assistant vice-provosts of diversity affairs, athletic coaches and the whole panoply of 21st-century academia.